"There is no question that artificial intelligence has transformed the stock market as we know it over the past three years, all but single-handedly driving the S&P 500 to record after record. Companies that are sitting at the forefront of this technology, like NVIDIA ( NASDAQ:NVDA), Microsoft ( NASDAQ:MSFT), Google ( NASDAQ:GOOGL), and Amazon ( NASDAQ:AMZN), have delivered returns that seemed impossible just a few years ago."
"Most importantly, the AI technology is real, and so far, the enthusiasm for this technology has been mostly justified, all while the long-term potential (and dangers) seems incredible. For investors who have stayed the course, portfolios have grown in a massive way over the last 36 months. But, and there is always a but, beneath this celebratory growth, there is a warning signal that has emerged."
"The artificial intelligence revolution has, without question, captivated investors in a way that almost no other technology has. The belief that AI is going to and has already started to automate work, revolutionize manufacturing, and create entirely new industries is just scratching the surface of what investors are thinking about. For companies that are in the AI world, all of this speculation and promise has led to explosive revenue growth."
Artificial intelligence has driven substantial gains in the stock market over the past three years, largely propelling the S&P 500 to repeated record highs. Major technology companies such as NVIDIA, Microsoft, Google, and Amazon have produced extraordinary returns tied to AI leadership. The AI technologies underpinning these gains show tangible commercial progress and have fueled rapid revenue growth in AI-related business units. Despite strong performance, a market indicator measuring the relationship between stock prices and underlying economic fundamentals has reached levels not seen since the dot-com era. That indicator previously preceded a multi-year bear market that erased roughly half of market value, signaling elevated valuation risk. Investors face a trade-off between continued AI-driven growth and heightened market vulnerability.
Read at 24/7 Wall St.
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